Loss of Tax Exemption

Loss of Tax Exemption and Automatic Revocation

(Losing Your Tax Exemption for Failure to File Annual Returns for Three Years)

……And what to do next!

Loss of Tax Exemption and Automatic Revocation

(Losing Your Tax Exemption for Failure to File Annual Returns for Three Years)

……And what to do next!

Have you been informed by the IRS that your nonprofit organization automatically lost its tax exemption for failure to file annual returns?

You are certainly not alone.  Some 500,000 nonprofits have lost their tax exemption since 2010 because of a change in the law that requires almost all charities and nonprofits to file annual returns.

Why did you lose tax exemption?

Any tax exempt organization that does not file an annual return, (a 990, 990-EZ or 990-n), for 3 consecutive years automatically loses their tax exemption.

 What is the impact of losing tax exemption?

Quite simply, your organization is no longer exempt from paying taxes and so may be liable for corporate or other types of taxes.  Also, if you are a 501(c)(3), donations to your organization are no longer tax deductible.  

 What can you do?

You will need to reapply for tax exemption as soon as possible.  This is true even if you did not have to apply for tax exemption before because you were a very small organization or were part of a group exemption.  The good news is that the IRS has procedures to apply to have their tax exemption reinstated – and even backdated to the date when it was lost.   See: https://www.magillrumsey.com/articles/new-irs-procedures-automatically-revoked-organizations/

What if you are not sure if you lost tax exemption?

Sometimes the IRS does not have a current address for an organization.  However, the IRS maintains a list of all organizations that have been automatically revoked.  You can search the list here: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search

You can also search Guidestar, a website that keeps data, including copies of 990s of most nonprofits: https://www.guidestar.org/

For help with reinstating tax exemption for your organization, please contact us at info@magillrumsey.com or call (734)995-2500 and ask to speak to one of our attorneys.

For more information, look at the FAQ page on the IRS website:  

Practice Area(s): Non Profit and Tax Exempt

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